Afterthoughts: All Eyes On (Model) 3

[William Maley]

In the coming months, one of the most anticipated and important vehicles will begin rolling off the production line. The Tesla Model 3 has a lot riding on it as there are over 370,000 pre-orders for the upcoming entry-level model. This is the vehicle that can either make or break the company.

So it seems quite interesting that Tesla is trying to pull attention away from this important model. During Tesla’s first-quarter earnings call, CEO Elon Musk expressed dismay at the lack of attention given to their flagship sedan, the Model S. 

"We have seen some impact of Model S orders as a function of people being confused" that Model 3 is the upgrade to Model S, Musk said on a conference call.

"We want to be super clear that Model 3 is not version 3 of our car. Model 3 is essentially a smaller, more affordable version of the Model S with fewer features,” Musk went on to say.

But why is Musk trying to put the spotlight back on the Model S? One only needs to look at the customer deposits for the Model S and X. In the first quarter, deposits on both models dropped 7 percent. The Model S is also getting up there in age. Let us not forget that Model S was first shown back in 2009 and didn’t enter production till 2012. Despite the numerous over-the-air updates with new technology features such as Autopilot and upgrades to the powertrain, it is still the same vehicle we saw many moons ago. Considering the types of models the Model S competes against, this isn’t a good thing.

Still, the Model 3 is the current sweetheart of Tesla whether they want it to be not. Unknowingly at the time when the world to the Model 3 back in 2015, Elon Musk had opened a Pandora’s Box. Many people like Tesla because they are not like your standard automaker and this has garnered the company a cult of personality that is more common with Apple or Google, not an automaker. When the Model 3 was shown and price tag revealed to be $35,000 (without federal and state tax incentives), everyone went crazy. People who envied those with either a Model S or X would now be able to join the cool kids and enjoy the perks of owning a Tesla.

With all of these pre-orders, Tesla has to get these models out quickly or face the wrath of angry buyers. But there are some serious concerns as to whether or not Tesla can meet it. For one, the company has a long track record of missing production dates. Remember how the Model X was supposed to come out in early-2014? Thanks to a number of delays, Model X production didn’t begin until the fall of 2015. But Tesla believes they have a solution to get the Model 3 in production on time.

Quote

“Reuters reports that Tesla is skipping a step most automakers undertake when producing a new vehicle. Prototype tools are bought in on the production line to help determine issues in terms of fit and finish. Once these issues are worked out, the prototype tools are scrapped and automakers place orders for permanent and expensive tools. But Musk told investors last month, Tesla was jumping into the permanent and expensive part first so they can meet their self-imposed volume production deadline of September.” - Tesla's Big Gamble With Model 3 Production, April 26, 2017

 

Tesla’s reasoning for skipping this step is that it brought a number of problems for the launch of the Model X. According to a source speaking to Reuters, “Tesla was unable to take any of the lessons learned from this before ordering the final production tooling,” due to a tight production deadline.

"Soft tooling did very little for the program and arguably hurt things," said the source.

One only needs to do a quick Google search on Model X issues to see a long list that includes massive gaps with the body panels and the futuristic Falcon Doors malfunctioning. But this is nothing new. Tesla’s build quality issues have been around for awhile and they still haven’t gotten them fully ironed out on either model. This isn’t a good sign when you’re getting to launch a model that will be produced in large quantities.

If there is one thing that Tesla has proven time and time again, it has been their resilience. Despite the bad news or fault, they have always seemed to find a way out. The Model 3 will be the ultimate test of their resilience. If they can pull off the launch of the Model 3 with only a few hiccups, then it would propel the company towards a higher place. But one massive screw-up or miscalculation could put Tesla in a difficult spot, one they might not be able to get out.

It makes sense that Elon Musk is trying to draw the attention away from the Model 3, but it is too late. The pandora's box has been opened and there is no way it can be shut. All eyes on are the Model 3 and Tesla just needs to ride it out.

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[riviera74]

Oops. Overpromising then underdelivering are never the right things to do.  I am sure they will figure all of this out, but car building is actually hard to do.  How Musk and Tesla deal with this kind of adversity will tell us whether Tesla itself will be truly viable or ends up more like a passing fad.

[G. David Felt]

Sounds like people better get prepared for a slip in the actual building and delivery of the Tesla 3. I question if they actually build and ship 25K this year.

[balthazar]

25K in 2017 would be a staggering success.
There are those out there that still believe it'll be over 200K by December.

[daves87rs]

No way they can build them that fast....